There Should Be No Tax Breaks For BP Oil Spill Fines

Fines paid by BP and other companies for the 2010 Deepwater Horizon oil spill would not be tax deductible under legislation proposed by U.S. Representative Jo Bonner. Some observers are concerned that the states that were most damaged by the oil spill might not receive most of the fine money, as promised in legislation President Obama signed into law in July. Hopefully, those concerns aren’t based in reality. But in any event, allowing BP and the other companies to take a tax deduction on the money they pay out for fines would be a big mistake.

All of Alabama’s Congressional delegation, which includes Martha Roby, Terri Sewell, Mike Rogers, Robert Aderholt, and Spencer Bachus, will co-sponsor the bill with Rep. Bonner. Confidential settlement talks on the civil fines between BP and the Justice Department have been ongoing and are not close to conclusion. Lots of false and misleading information has been leaked out to the media, believed to come from BP, relating to progress toward settlement being made. Estimates are that the fines could be as much as $25 billion.

I am confident that the Obama Administration will respect the RESTORE Act, under which 80 percent of the fines levied against BP under the Clean Water Act are to go directly to Alabama, Florida, Louisiana, Mississippi and Texas. The RESTORE Act allows local officials in the five states to spend the money on environmental restoration or economic development projects. Fines paid through the Oil Pollution Act could allow federal officials to control the money and they could spend it on ecological projects. Personally, I would prefer that the claims by both the states and federal government be tried in court unless tremendously good settlements are reached. The Justice Department reaching a settlement with BP relating to criminal charges has to help out on the civil fines aspect of this matter. The bulk of money coming to the states and federal government will be from the civil fines, and the amounts should be huge.